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Overqualified and Underemployed: The Job Market Waiting for Graduates

We’ve established that college can cost a lot, and that a recent graduate is generally going to have a fair bit of debt when they head out into the world. We’ve also debunked the wage comparisons often used to sell the idea to prospective students. But the reality is even worse, because to this point we’ve largely granted the premise that a degree will secure the holder with a better job. How often is this actually true?

A lot’s been written about the comparative unemployment rates between graduates and non-graduates. Most of the numbers do a poor (read: nonexistent) job of isolating whether or not the lack of a degree is to blame for the lack of a job among non-graduates. But either way, reducing employment to a binary setting isn’t consistent with one of the primary reason degrees are supposed to be valuable: the quality of employment. Jobs can be better or worse, and people can hold jobs where their level of education is superfluous.

There’s a word for someone who has a job that does not require the degree they hold: “underemployed.” In 2008, over 35% of college graduates were underemployed; by June of last year, the Federal Reserve Bank of New York reported that a whopping 44% of graduates were underemployed. And it’s not just because of the recession: the number’s been rising since 2001.

And more education doesn’t’ exactly help; in fact going to graduate school can make things worse. In 2008 22% of people with PhDs or professional degrees and jobs were underemployed. That number rises all the way to 59% for people with master’s degrees.

When you think about the financial situation most students are in, it’s not hard to see why this happens. Higher levels of education do not merely add to your job prospects—it forces you to shift them upward. This means some higher-paid positions become feasible, but some lower-paid ones suddenly aren’t, either because the graduate refuses to take a job below their education level, or (more commonly) because the extra student loans make it financially difficult to do so. And over qualification (and with it, turnover) is a real concern for employers filling low-level jobs.

This is one of the ripple effects of student loan debt: you might have to take a job below your education level to keep up with the payments. A heartbreaking 20% of college graduates with student loans eventually give up on their preferred line of work to get a better paying job to help pay off their debt.

What causes this? A simple misreading of the labor market. Supply outstrips demand. The Center for College Affordability and Productivity (CCAP) sums it up pretty well:

“Basically, college graduates were supplied at a higher rate than the labor market demanded, with the predictable result that they were forced to find employment in lower-skilled occupations.”

It’s been the unofficial policy of many leaders, political and otherwise, to champion higher education as a universal good. Not because they’d studied the demand for certain types of educated workers, but simply as a catch-all solution. The market has long since adjusted to this, but the advice hasn’t: it’s still selling people indiscriminately on a level of education that employers don’t seem to be asking for.

This situation illustrates a major logical flaw in the college argument: if a degree confers advantages over people who don’t have one, what happens when more people get one? The benefit is relative—the more people who take the advice, the less it makes sense. If this is part of the intelligentsia’s case, they need not have spent so much time in school: eighth grade dropout Yogi Berra proved himself perfectly capable of the same error when he said that “nobody goes there any more—it’s too crowded.”

Degrees, of course, are not worthless. Part of the argument in their favor is that even the underemployed are getting better jobs than those without degrees. But the advantage is smaller than graduates expect, and shrinking, to boot. The average college student overestimates how much they’ll earn after they graduate by a massive 45%. And from 2000 to 2007—which is measuring a period of significant economic growth before the recession, mind you—the earnings for college graduates between the ages of 25 and 54 dropped 8.5%. And these were jobs that weren’t especially high-paying to begin with.

The most sobering numbers, however, aren’t about salaries, but about how debt can put people’s lives on hold. Almost 45% of recent college graduates put off buying a house because of their debt, and 55% delayed saving for retirement because of it. 14% of recent graduates put off marriage on account of their debt, and 28% put off having children.

The effects of a graduate’s debt ripple throughout every aspect of their lives, both personal and professional.

In the next installment, we’ll take a look at dropout rates and post-graduation dependency.

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